Group insurance is an important tool for companies that want to offer benefits to their employees. It generally covers areas such as health insurance, dental insurance, life insurance, and sometimes disability insurance. Although beneficial to workers, group insurance also represents a significant expense for employers. Several factors influence the cost of this coverage, and understanding them allows for better anticipation of price variations and optimization of plan management.
Factors beyond our control:
1. The size of the company
The number of employees covered is a determining factor. The more employees a company has, the more it can benefit from a pooling effect. In other words, the risks are shared among a larger number of people, which can stabilize or even reduce the cost per insured person. Conversely, in a small company, a single large claim can have a significant impact on the overall premium. This is why insurers consider large companies to be less risky from an actuarial standpoint.
2. The average age of employees
The age of the insured group directly influences the cost. Older people are statistically more likely to make claims due to more frequent health problems. Thus, a group of employees with a high average age will result in higher premiums. Conversely, a younger group is generally less expensive to insure.
3. The sector of activity
The sector in which the company operates also plays a role. Certain industries, such as construction, manufacturing, or healthcare, are associated with a higher risk of accidents or occupational illnesses. This translates into higher insurance costs. Companies in the technology or customer service sectors, on the other hand, may present lower risks.
4. History of claims
The group’s claims history is an important indicator for insurers. If a group has generated numerous claims or high costs in previous years, premiums will be adjusted upward to offset this risk. Conversely, a group with few claims may benefit from stable costs or even reductions.
5. Geography and access to healthcare
The geographic location of the business can also influence costs. In some regions, access to care may be limited, which increases demand on available professionals and, consequently, the cost of services. In addition, medical expenses can vary significantly from one province or country to another, influencing the premiums charged by insurers.
6. Healthcare market trends
The overall trend in healthcare costs inevitably affects group insurance premiums. Rising drug prices, the introduction of new medical technologies, and shortages of certain healthcare professionals can all lead to increased costs. In addition, social issues such as an aging population and pandemics (such as COVID-19) can have a global impact on the market.
Factors that we control:
1. The design of the insurance system
The choices made when designing the plan have a direct impact on the cost. For exemple :
- The level of coverage offered: a plan that reimburses 100% of medical expenses will obviously cost more than a plan that covers only 70%.
It is therefore crucial for employers to strike a balance between the generosity of the plan and the available budget.
2. Employee participation in financing
In most cases, employees share the cost of premiums with their employer. The greater the employee contribution, the lower the cost to the company. However, this can also influence perceptions of the plan’s value and even employee satisfaction. The level of employee participation is therefore a management lever, but it must be used with caution.
3. Choice of insurer and competition
Not all insurers charge the same premiums for similar coverage. Competition among insurers allows companies to shop around for the best value for money. In addition, some companies offer corporate health and wellness programs, which can help control costs in the long term.
4. Prevention and wellness programs
Companies that implement workplace health initiatives, such as wellness programs, vaccination campaigns, or psychological support services, can help reduce absenteeism and claims. These efforts can be rewarded with lower premiums in the medium and long term.
5. Regime structure
Traditional insurance: In this model, the insurer is responsible for both the administration of the plan AND the financial risk.. This is the most common option for SMEs and some large companies. The risk is moderate, but the administrative costs are higher.
ASO (Administrative Services Only): In this model, the company assumes the financial risk associated with claims but entrusts the administration of the plan to an insurer or third party, resulting in reduced administration costs but also higher risk for the company.
